Alaris Royalty commits up to $91 mln to Body Contour Centers

Canadian alternative equity firm Alaris Royalty Corp has invested US$46 million in Body Contour Centers LLC (BCC), a Kirkland, Washington-based plastic surgery practice with more than 50 locations across the United States.

Alaris also committed to invest an additional US$45 million in BCC in future tranches, subject to the new portfolio company achieving certain financial targets.

The proceeds will be used by BCC to fund growth and provide partial liquidity to existing shareholders.

Alaris also invested US$7 million more in Accscient LLC, an Atlanta, Georgia-based provider of information technology staffing, consulting and outsourcing services. Alaris first invested in the business last year.


Alaris Royalty Corp. Commits to Fund Up to US$91 Million to a New Partner and Contributes US$7 Million to Accscient

CALGARY, Alberta, Sept. 17, 2018 (GLOBE NEWSWIRE) — Alaris Royalty Corp. (“Alaris” or the “Corporation”) (TSX: AD) is pleased to announce that it has contributed US$46,000,000 (the “BCC Contribution”) to a new partner, Body Contour Centers, LLC (“BCC”), and has committed to contributing an additional US$45,000,000 (the “Additional BCC Contributions”) to BCC in two future tranches dependent on BCC achieving certain financial targets. The Corporation is also pleased to announce a follow-on contribution of US$7,000,000 (the “Accscient Contribution”) into Accscient LLC (“Accscient”). The US$53,000,000 of contributions announced today add approximately $0.27 cents and $0.13 cents per share of revenue and net cash from operations respectively. Alaris has approximately $155,000,000 of undrawn capacity on its credit facility (the “Facility”) following today’s announcement and estimates its run-rate payout ratio to be 92%.

New Partner – Body Contour Centers, LLC

Alaris entered into subscription and operating agreements with BCC on September 14, 2018, pursuant to which Alaris made the BCC Contribution in exchange for preferred units in BCC (the “BCC Units”), which entitle Alaris to a US$6,440,000 distribution (the “BCC Distribution”) for the first full year following the transaction, representing an initial yield of 14%. BCC has the option to pay a portion of the BCC Distribution, subject to a maximum of 2% of the aggregate contributed capital to BCC in any given year as payment in kind (“PIK”) provided that any amounts subject to the PIK must be paid every three years. If utilized, any amounts PIK’d will compound monthly. The BCC Distribution will be adjusted annually (commencing January 1, 2020) based on the change in same clinic sales, subject to a 6% collar and will represent approximately 8.5% of Alaris’ revenue. The BCC Contribution was used to fund growth and provide partial liquidity to existing equity holders.

Alaris has also committed as part of the operating and subscription agreements with BCC to the Additional BCC Contributions consisting of US$20,000,000 (“Tranche 2”) and US$25,000,000 (“Tranche 3”). The Tranche 2 and Tranche 3 contributions will be funded upon BCC satisfying certain financial targets. If the Additional BCC Contributions are funded, Alaris will have contributed a total of US$91,000,000 to BCC. The Additional BCC Contributions will carry the same terms as the original BCC Contribution. Up to 25% of the BCC Units are redeemable at par at any time following the earlier of the second tranche closing and three years from the original closing date, prior to such time these units are non-redeemable.

“Alaris is thrilled to be adding what could eventually become one of our largest partners. Body Contour Centers is the unquestioned market leader in a field that continues to grow at a high rate in the US. Adding yet another partner with a great balance sheet and in a very desirable industry is another example of our ability to deploy capital in competitive situations. We look forward to supporting BCC’s world class management team for years to come,” said Steve King, President and Chief Executive Officer, Alaris.

Body Contour Centers, is the largest private plastic surgery practice in the United States with over 50 locations across the country. Operating in nearly 30 states and over 50 cities, it combines a consistent patient experience with the art of treating each patient as an individual with unique plastic surgery needs. Procedures are conducted by over 100 board-certified plastic surgeons and every surgical center is certified by AAAHC, the highest-level certification for plastic surgery. BCC is growing rapidly, doubling its location count over the last two years. The company celebrated its tenth year of delivering great patient outcomes in July 2018 and lives by a mission that everyone deserves to have their best body today and pursue their best life now.

“We are excited to embark on the next phase of growth via this partnership with Alaris. Their flexible capital solution will allow our management team to pursue our vision for growth while recapitalizing our balance sheet in a prudent way. We look forward to a long and successful relationship with Alaris,” Chris M. Par, Chief Executive Officer, Body Contour Centers, LLC.

Based on Alaris’ review of BCC’s internal pro forma results for the most recent trailing twelve month period in 2018, management of Alaris believes that BCC would have an earnings coverage ratio in a range of 1.2x to 1.5x, after giving effect to the BCC Contribution, other changes to BCC’s capital structure and the BCC Distribution payable to Alaris.

Accscient Follow-On
In exchange for the Accscient Contribution announced today, Alaris is entitled to an additional US$1,001,000 of distributions from Accscient. Alaris now has US$30,000,000 invested in Accscient and is collecting run rate distributions of US$4,430,000. Accscient’s cumulative distribution accounts for approximately 6% of Alaris’ total revenue. Proceeds of the Accscient Contribution were used by Accscient to acquire a business complimentary to their current operations.

Alaris provides alternative financing to the Partners in exchange for distributions with the principal objective of generating stable and predictable cash flows for dividend payments to its shareholders. Distributions from the Partners are adjusted each year based on the percentage change of a “top line” financial performance measure such as gross margin and same-store sales and rank in priority to the owners’ common equity position.

For further information please contact:
Curtis Krawetz
Vice President, Investments and Investor Relations
Alaris Royalty Corp.
P: (403) 221-7305